Selected data pertaining to Castile Co. for the current calendar year is as follows: Net cash sales: $ 3,000 Cost of goods sold: $18,000 Inventory at beginning of year: $6,000 Purchases: $24,000 Accounts receivable at beginning of year: $20,000 Accounts receivable at end of year: $22,000 What was the inventory turnover for the current year

Question

Sage Morrow

Business

31 December, 11:29

Selected data pertaining to Castile Co. for the current calendar year is as follows: Net cash sales: $ 3,000 Cost of goods sold: $18,000 Inventory at beginning of year: $6,000 Purchases: $24,000 Accounts receivable at beginning of year: $20,000 Accounts receivable at end of year: $22,000 What was the inventory turnover for the current year

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Leon Vaughan · Answer 1

2.0 times

Explanation:

The inventory turnover ratio indicates how efficient a company is in converting its inventory into sales. It shows the number of times a business sells and restocks its inventory in a period.

The formula for calculating inventory turnover is as follows.

Inventory turn over = Costs of goods sold / Average inventory

For Castile Co.

COGS is $18,000

Average inventory = Beginning inventory + ending inventory / 2Beginning inventory = $6,000

if COGS = Beginning inventory + Purchases - Ending inventory

Then $18,000 = $6000 + $24,000 - ending inventory

=$18,000 = $30,000 - ending inventory

Ending inventory = $30,000-$12,000

Ending Inventory = $12,000

Average inventory = $6000+$12,000/2

Average inventory = $9,000

Inventory turnover = $18000/$9000

=2.0